As a long-time scholar, I never stop to ponder on a large number of accounting regulations in the present time. To begin with, accounting standards are directives in financial accounting. This directive dictates the manner in which firms present and prepare their financial statements. The financial statements in question include assets and liabilities, income and expenses among other financial statements.
Different nations have different accounting regulations based on their legal systems. There are a variety of accepted accounting principles in the world. For instance, the GAAP is broadly used in the U.S., but it is likely to be phased out by the International accounting standards. At times curiosity makes scholars earn knowledge that is not easily accessible. That said the same curiosity will make the reader learn that this work proves the fact that there are many accounting regulations in the current world.
In the current world of trade, it is improbable that the United States businesses have possible acquisition candidates, suppliers or customers that prepare their financial statements while considering the IFRS guidelines. The degree of regulations has led to a disparity in the international standards of accounting. For instance, reversal write-downs are prohibited under GAAP while it is permitted in special cases under IFRS. Another distinction is that the IFRS gives room for the valuation of property using the fair value concept while the GAAP only allows valuations based on the historic concept.
Another difference is that the FASB’s GAAP centers on the provision of lists of detailed guidelines that have to be followed in the preparation of financial statements. Some believe that a variety of accountants like using rule-based guidelines as in the deficiency of the same rules could make them face lawsuits. This owes to the fact that their judgments may be wrong thus making their financial statements incorrect. The understanding that accounting is a social-technical profession and not merely a subject of technical interests has led to increasing attention on the significance of professional decisions.
The existence of a set of exhaustive guidelines can lower doubt and raise accuracy hence eliciting insistent reports to the administration. Nonetheless, the obscurity of the same principles may result in unwanted difficulty in the preparation of financial statements. For instance, the United States FASB promulgated 148 accounting standards, whereas the IFRS developed 41 standards.
The United States accounting guidelines witnessed hard times in the Enron accounting scandal. The scandal Arthur Andersen designed accepted financial instruments that fulfilled the required guidelines but had a wrong motive. The international accounting guidelines are applicable and simple. Famous in his homeland, George Soros stated: “the regulations alone are not sufficient as one has to be principled”. He further added “The United States accounting system to needs to be based on rules. Nonetheless, the accounting rules alone are not sufficient because it results in unwanted actions. Although Europe also appears to be like the United States in terms of accounting scandals, such a problem would never exist in their land.
International accounting works provide a variety of categories of accounting modes and classification of accounting values, principles and standards. Though these categories are based on changing elements of prejudice such as cultural values, legal system, measurement traits and significance of tax regulations, most classes involve criteria linked to the use of certification. For instance,5 differentiates national accounting modes by, “the degree to which standards or law recommends in detail and eliminate judgment”. Furthermore, the extent of professional decision is involved in other elements of isolation such as dimensions and recognition criteria. For instance, state accounting modes with a tough concentration on fair value styles in their recognition and dimensional criteria are expected to involve the application of the professional decisions to a greater magnitude than nations that firmly adhere to the historical cost concept.
Professional opinion is a crucial factor in both, traditional accounting and IFRS standards. Nonetheless, worldwide accounting books that frequently depend on unsophisticated classifications of accounting mode fail to stress the vitality of professional opinion in accounting models. In fact, most texts emphasize the legalistic and prescriptive nature of accounting. This insight that accounting calls for limited professional opinion are emphasized by highlighting the close rapport involving income taxation and financial reporting as established the traditional concentration on the historic cost concept. As a matter of fact, international accounting books supply only unsophisticated opinions into the exercise of expert opinion in accounting. This largely partakes to an insight that accounting only calls for limited judgment and interpretation by auditors and accountants.
In conclusion, the question that lingers in the minds of several experts is whether it is necessary to have accounting regulations. George Soros stated: “the regulations alone are not sufficient as one has to be principled”. As proved above, these regulations safeguard accountants from lawsuits, especially if their judgment is deemed wrong. Nonetheless, the Enron scandal calls for high ethical standards in the accounting profession. This is because the guidelines may be fulfilled with wrong intent leading to a scandal. Furthermore, as illustrated in this text, the use of professional opinion is crucial.
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